Lutanda Children's Services
[2010] FWA 7247
•24 SEPTEMBER 2010
[2010] FWA 7247 |
|
DECISION |
Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement
Lutanda Children's Services
(AG2010/1669)
COMMISSIONER MCKENNA | SYDNEY, 24 SEPTEMBER 2010 |
Lutanda Children's Services Enterprise Agreement 2010.
[1] Lutanda Children’s Services (“the applicant”) has made an application for the approval of an enterprise agreement titled the Lutanda Children’s Services Enterprise Agreement 2010 (“the Agreement”). The Agreement is proposed to cover 42 employees who work at camps across three locations in New South Wales as full-time, part-time, casual and trainee employees categorised as either (a) hospitality employees or (b) social and community employees. The camps are run on weekdays and some are run on weekends.
Loaded rates
[2] Hospitality employees: The employer’s declaration nominated the following comparator instruments concerning the hospitality employees:
- Motels, Accommodation and Resorts Award 1998 (“the Federal Award”);
- Hospitality Industry (General) Award 2010 (“the Hospitality Modern Award”);
- National Training Wages Award 2000.
[3] The employer’s declaration indicated the Agreement contains loaded wage rates incorporating the following:
- laundry allowance from cl.21 of the Hospitality Modern Award;
- annual leave loading from cl.34.2 of the Hospitality Modern Award;
- penalties for Saturdays from cl.26 of the Federal Award;
- penalties for Sundays from cl.27 of the Federal Award;
- penalties for public holidays from cl.32 of the Federal Award; and
- penalties for permanent employees working outside the hours of 7.00am-7.00pm from cl.23.8 of the Federal Award.
[4] The employer’s declaration further indicated there are no clauses in the Agreement which are equivalent to provisions from the Hospitality Modern Award, including (but not limited to):
- cl.12.5 - minimum engagement provisions for part-time employees;
- cl.13.2 - minimum engagement provisions for casual employees;
- cl.16.3 - job search entitlement on termination of employment;
- cl.17.4 - job search entitlement for redundancy;
- cl.25 - mixed functions;
- cl.26 - payment of wages; and
- cl.38 - no deductions for breakages or cashiering underings.
[5] Social and community services employees: The employer’s declaration nominated the following instruments in relation the social and community employees:
- Social and Community Services Employees (State) Award (“the NAPSA”);
- Social, Community, Home Care and Disability Services Industry Award 2010 (“the Social and Community Services Modern Award”);
- National Training Wages Award 2000.
[6] The employer’s declaration indicated the Agreement contains loaded wage rates incorporating the following:
- penalties for weekend work from cl.11 of the NAPSA; and
- penalties for public holidays from cl.42 of the NAPSA.
[7] The employer’s declaration further indicated there are no clauses in the Agreement which are equivalent to provisions from the Social and Community Services Modern Award, including (but not limited to):
- minimum engagement for casual employees from cl.10.4;
- job search entitlement for termination of employment from cl.11.3;
- job search entitlement for redundancy from cl.12.4;
- payment of wages from cl.23;
- higher duties from cl.29; and
- ceremonial leave from cl.34.
[8] While the employer’s declaration cross-referenced the ordinary hours of work clauses as between the Hospitality Modern Award, the Social and Community Services Modern Award and the Agreement, the respective provisions are entirely different because the Agreement does not contain any comparable work parameters.
[9] As to these loaded rates, the employer’s declaration stated (in relation to rates for both occupational groups):
“Rates of Pay within Schedules [sic] A of the Agreement
The hourly rates of pay in the Agreement as set down in Schedule A of the Agreement have been specifically calculated to accommodate the average working patterns of all Employees covered by the Agreement. The average weekly hours worked by Employees in each of the penalty periods attracted by the Award have been factored into the hourly rates of pay provided in Schedule A of the Agreement. These hourly rates of pay calculate the monetary value of the average weekly hours worked in each penalty period which, when combined with the annual value of any relevant loading or allowance under the Award, have been used to calculate an annual salary. This annual salary has been converted into an hourly rate as provided for within Schedule A of the Agreement. An additional $200 annual advantage as been made in all relevant Agreement calculations to additionally compensate all employees covered by this Agreement in a manner outside any parameters set down by the reference instruments.
Annexure A Part 1
Please refer to Annexure A Part 1 to this Employer Declaration which sets out the calculations made to ensure that the Base Rates of Pay in the Schedule A of the Agreement provide all employees with an overall advantage as at test time. The hourly rates in the Agreement ensure that Employees are not only better off overall at the test time, but remain better off overall in comparison to the relevant Modern Award on 31 July each year up to an including 31 July 2014, as required by Part 4D of the Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2014 [sic].
Annexure A Part 2
Annexure A Part 2 to this Employer Declaration provides calculations based on average weekly hours worked by Employees, in each of the penalty periods under the fully transitioned Modern Award in 2014. An annual advantage of $200 has been added to these rate calculations referenced to the Modern Award.
The Base Rates of Pay arrived at by the calculations set down in Annexure A Part 2, when compared to the rates of pay in Schedule A of the Agreement (as defined in Clause 2 of the Agreement) are as follows: ...
... The above tables and figures demonstrate that all Employees are not only better off under the Agreement as at test time, but remain better off overall in comparison to the Modern Award on 31 July of each year up to and including 31 July 2014, as required by Part 4D of the Fair Work (Transitional and Consequential Amendments) Regulations 2014 [sic].”
[10] The loaded rates do not factor-in contingent allowances which may arise for individual employees, for example, overtime meal allowance, etc. Apart from an allowance for motor vehicle usage, such allowances are not otherwise contained in the Agreement.
[11] The employer’s declaration included a table setting out the “Hourly Rate calculated with reference to the modern awards at the end of the transitional period (2014)” as against the “Hourly Rate in the Enterprise Agreement”. That table commences with permanent Level 1 hospitality employees aged 20 and over; the table shows the hourly rate in the Agreement and the hourly rate with reference to the modern award at the end of the transitional period in 2014 at the same amount of $15.56. The comparative rates for each category of employee are then progressively listed, starting with, for hospitality employees, a few cents in difference, but rising to dollars in difference for various categories of social and community services employees. The application was further supported by spreadsheets showing comparative information.
Rosters
[12] Information about the basis for the assumptions concerning the hours’ formulation used for the calculation of the loaded rates in the spreadsheets was not provided with the employer’s declaration; the supporting papers did not outline the basis on which weekly hours or operating spans were calculated. Rosters for the facilities operated by the applicant were provided at my request for further examination.
[13] The applicant provided rosters for camps at Mount Victoria, Toukley and Yarramundi for the hospitality employees, as being indicative of the working patterns on which the loaded rates were calculated. However, the rosters provided for Mount Victoria did not appear to have any guests during roster period. That is, the Mount Victoria rosters record only administration employees working during the roster period. On the other hand, the rosters for Toukley and Yarramundi show, for example, guest services and kitchen employees on the roster as well as administration employees. It is unclear why rosters of this nature would be relied on or provided to Fair Work Australia as indicative rosters, unless, for example, a camp without guests could be considered to be relevantly indicative or, for example, that camp does not cater for guests needing guest services and kitchen employees, e.g., guests who self-cater.
[14] The employer’s declaration attached spreadsheets using certain hours’ assumptions in the calculation of the loaded rates for the social and community employees. In response to my request for rosters, a statutory declaration has instead been provided indicating these employees work Mondays to Fridays within the hours of 9.00am to 5.00pm - with standard hours each week, either as full-time or part-time employees. As such, social and community employees do not have published rosters. No further information was provided about the pattern of hours within the 9.00am to 5.00pm spread for the permanent part-time employees or casual employees who work less than full-time hours.
[15] Section 193(1) of the Act provides that an enterprise agreement passes the better off overall test if Fair Work Australia is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee. Further, s.193(7) of the Act provides that for the purpose of determining whether an enterprise agreement passes the better off overall test, if a class of employees to which a particular employee belongs would be better off if the agreement applied to that class than if the relevant modern award applied to that class, Fair Work Australia is entitled to assume, in the absence of evidence to the contrary, that the employee would be better off overall if the agreement applied to the employee.
[16] Indicative rosters in relation to the assessment of loaded rates have been considered in a number of recent applications for the approval of enterprise agreements before Fair Work Australia, including Shaydi Pty Ltd and others [2010] FWA 4262 at [23]-[24]; Earthfield Pty Ltd t/as Bakers Delight Diamond Creek, Bakers Delight St Helena & Bakers Delight Laurimar Enterprise Agreement 2009[2010] FWA 5752 at [5] (“Earthfield”); and Turn Key Distribution Pty Ltd re Turn Key Pty Ltd Enterprise Agreement [2010] FWA 6987 at [7]-[14] (“Turnkey”). As in those cases, modeling and analyses of the rosters again do not necessarily accord with the assumptions propositioned in the spreadsheets. Moreover, the question of advantage and disadvantage will depend on the actual times and days an employee may be rostered to work, rather than arising from an assumed, standardised model. In this respect, see Margin Brothers Pty Ltd T/A Campbell IGA Friendly Grocer [2010] FWA 2105 at [25] (“Margin Brothers”) and Nepero Pty Ltd T/A Morgan’s Super IGA [2009] FWA 1712 at [39] (“Nepero”). As to the application of the better off overall test, see also Top End Consulting Pty Ltd re Top End Consulting Enterprise Agreement [2010] FWA 6442 at [26]-[29].
[17] A comparison of the rates and conditions of employment in this Agreement as against the awards shows some employees would be disadvantaged by this Agreement, including employees who do not work hours according with the generalised assumptions advanced by the applicant in the spreadsheets. For example, the applicant provided, among other calculations, a spreadsheet with comparative information concerning the Federal Award and the Hospitality Modern Award rates for Level 1 casual hospitality employees aged 20 years and over. That spreadsheet specifies an hourly rate of $18.44 under the Hospitality Modern Award and an hourly rate of $18.08 for the Agreement. Casual hospitality employees working Monday to Friday would be disadvantaged under the Agreement by between 0.93 per cent and 1.94 per cent as against the highest transitional reference rates, depending on the graded level.
[18] Further, hospitality casuals working on public holidays also would be financially disadvantaged. For example, the Agreement provides Level 1 casual hospitality employees aged 20 years and over working on public holidays $31.64 an hour and $27.23 for permanent employees, whereas the public holiday provision in the reference instruments set at 275 per cent would provide higher payments.
[19] If, for example, a camp was run for five weekdays starting with the Monday of the upcoming long weekend in October, or during any week where a camp was run including a day that is a public holiday, hospitality casual employees would be significantly disadvantaged given the combination of the weekday rates and public holiday rates in the Agreement. Moreover, for employees other than casuals, the Hospitality Modern Award provides a minimum payment of four hours’ work on public holidays.
[20] The statutory declaration in support of the rostering arrangements concerning the social and community employees indicated they work stable Monday to Friday patterns as full-time or part-time employees, even though the spreadsheets assume a different, standardised pattern of hours. Given that these employees do not work other than a 9.00am to 5.00pm weekday pattern, the loaded rate, containing allowance for working non-standard hours etc., may practically provide a test time advantage for social and community employees which may exceed that suggested by the applicant and, for example, casually-employed social and community services employees appear to be well-advantaged financially at the test time by the Agreement. As to public holidays, however, the Agreement allows the applicant to roster employees on public holidays, and request employees to work on public holiday. However, the Agreement provides no public holiday payments for social and community workers - apart from as may be otherwise generally provided by the value or assumption for payment for public holidays included in the loaded rate.
[21] More than 40 per cent of the employees intended to be covered by the Agreement are casually employed and, if hospitality employees, would be disadvantaged by the Agreement if they predominantly work ordinary hours during weekdays and/or or if they work on a public holiday (it was unclear what percentage within that group of casuals work as hospitality employees, as opposed to social and community employees).
Hours of work/overtime
[22] As to hours of work, cl.7 of the Agreement provides that the ordinary hours of work for employees will not exceed 38 hours per week on average over 26 weeks. Except as provided in cl.7, the Agreement does not otherwise define ordinary hours or hours that would attract penalty rates for additional hours worked under cl.7.3. The Agreement does not contain minimum hours per shift. The Agreement does not contain a cap on the hours worked in any day, week, fortnight or month over 26 weeks before overtime rates under cl.7.3 would be attracted. Further, cl.7.4 is in the nature of a “preferred hours” arrangement. I note also that the Agreement and the undertakings provide for payment for weekday overtime at time and a half for the first three hours and double time thereafter.
[23] Clause 7 of the Agreement has similarities to clauses which have been the subject of previous expressions of concern by Fair Work Australia in decisions including Nepero at [38], Margin Brothers at [26] and Turnkey at [20]-[23]. It suffices to say those concerns similarly arise in relation to this Agreement considered, for example, in relation to the combined effect of the provisions of cl.29 of the Hospitality Modern Award concerning ordinary hours of work and cl.12 concerning part-time employment. Clause 33 of the Hospitality Modern Award also provides payments of double time for overtime worked on a rostered day off, with a minimum payment of four hours. Further, cl.33.3(c) provides that overtime worked on any day stands alone. The provisions in the Agreement as they concern hours (even with the undertakings considered later) could not be considered to be more beneficial to the employees than these types of provisions from the Hospitality Modern Award.
Wage increases
[24] Clause 9.1 of the Agreement provides as follows in relation to wage adjustments:
“9. Remuneration
9.1 The minimum rates of pay for each hour worked are set out in Schedules [sic] A of this Agreement and are subject to adjustments by Fair Work Australia pursuant to section 206 of the Act”
[25] Further, Schedule A to the Agreement concerning the minimum rates of pay also contains boxed, bolded text which reads:
“* NOTE: ALL RATES ARE CURRENT AT THE TIME OF PRINTING AND ARE SUBJECT TO ADJUSTMENT BY
FAIR WORK AUSTRALIA
[26] Thus, the Agreement is constructed such that employees will not receive any wage increase over the four year nominal term of the Agreement unless the loaded rates fall behind the relevant base rate of pay as defined by s.206 of the Act. In this respect, the applicant’s representative, Enterprise Initiatives Pty Ltd/EI Legal, submitted it is relevant only to assess the Agreement at the test time, and the loaded rates passed the better off overall test at that point in time.
[27] Even if it were accepted the wage rates passed the better off overall test at the test time, the practical reality is that the employees will be progressively disadvantaged - given that wage increases periodically will be made to the modern awards but not to the loaded rates in the Agreement, being rates which contain a component to compensate for the payments and penalties specified in the employer’s declaration. The test time value of the loaded rates will not keep pace in dollar and/or percentage terms with what the employees otherwise would be entitled to if they continued to be employed under the modern awards, i.e., modern award rates will increase each or at least most years, given the reasonable predictability of award wage increases. If s.206 of the Act was engaged as a wage increase mechanism for the employees under this Agreement, the test time value of the loaded wages in the Agreement relied on in satisfaction of the better off overall test at the test time would have been subsumed completely.
[28] The employer’s declaration stated the applicant held staff meetings at each work location and took “reasonable steps to ensure that each Employee to be covered by the proposed Agreement understood the operation of each clause of the Agreement, and the effect of each clause. For those employees who are aged under 21 years of age, parents/guardians were invited to attend these staff meetings to discuss any questions they had with the Agreement. The Employer also provided the details of a contact person to each Employee to be covered by the proposed Agreement in order for each employee to ask questions or seek clarification in relation to the terms of the Agreement prior to the secret ballot taking place.” EI Legal also submitted that cl.9.1 of the Agreement was explained to employees at staff meetings held prior to the secret ballot, and questions raised by employees were all addressed.
[29] There may be room for concern about whether the import of the lack of wage increases to the loaded rates in the Agreement other than by operation of s.206 of the Act as it concerns base rates of pay was adequately explained. Without impugning the information in the employer’s declaration or the submissions by EI Legal on its client’s behalf, it is far from clear why a majority of properly-informed employees (whom I expect may be taken to be financially rational and economically self-interested individuals) would vote in favour of an Agreement which will see them being progressively financially disadvantaged over the four year life of the Agreement - even if it were accepted the loaded wage rates in the Agreement momentarily passed the better off overall test at the test time.
Proposed undertakings
[30] The applicant has proposed a number of undertakings. In summary, the proposed changes include: revising the averaging period for hours; introducing a minimum engagement, and making consequential changes; introducing a new overtime arrangement for permanent part-time hospitality employees (this undertaking is referenced to “the ordinary hours of work as agreed in accordance with cl.4.1 of the Agreement”, but that clause does not deal with set part-time hours such as in cl.12 of the Hospitality Modern Award); introducing a new overtime arrangement for permanent part-time social and community employees; introducing time off in lieu of payment for overtime arrangements for social and community employees; excising the preferred hours arrangements; clarifying superannuation arrangements; addressing a discriminatory term; clarifying long service leave; revising redundancy scale payments for social and community services employees, depending on the date of the redundancy; revising the arrangements concerning breaks for hospitality employees; revising the arrangements concerning breaks for social and community employees; and introducing provisions for payment of wages.
[31] It may be noted that a number of these undertakings are designed to incorporate some provisions which would otherwise apply under the awards, thereby doing no more and no less than bringing the Agreement into better conformity with entitlements otherwise applicable under the awards. It is unclear how it could have been contended that the Agreement as filed would have passed the better off overall test, given that the award-referenced provisions were not also featured in the Agreement as filed.
Conclusion
[32] I have not been satisfied that each award covered employee and each prospective award covered employee for the Agreement would be better off overall if the Agreement applied to the employee than if the relevant modern awards applied to the employee, having regard, in particular, to the rates for employees who do not work the standardised hours assumed in spreadsheets. For example, casual hospitality employees typically working Mondays to Fridays would be disadvantaged by the Agreement; and would be further disadvantaged if that week contained a public holiday. As to public holidays, it may be noted EI Legal submitted the applicant is “open for all public holidays except Good Friday and Christmas Day”. A hospitality casual who was only called-in to relieve on public holidays would be disadvantaged in terms of wage rates. A permanent hospitality employee may be disadvantaged by, for example, the public holiday minimum engagement period which is shorter than the four hours in cl.32.2 of the Hospitality Modern Award. A social and community employee, whether permanent or casual, rostered to work a public holiday would be disadvantaged as against the relevant award.
[33] Even with the provision of undertakings, there are various aspects of the Agreement as it concerns the lack of work parameters in terms of hours and overtime that would otherwise act to the comparative disadvantage of employees. The Agreement does not address either through the loaded rate or as disaggregated entitlements, certain benefits that otherwise would be attracted; and there is, for example, no casual conversion provision. The compensating benefits of this Agreement, as tempered by the proposed undertakings and including the “$200 annual advantage”, are not such as to lead to a conclusion the better off overall test has been met.
[34] Some of the proposed undertakings would not result in any substantial change to the Agreement, such as those having a clarifying operation and those addressing discrimination on the face of the Agreement. However, the undertakings also address a range of core employment arrangements that featured in the Agreement as filed. The provisions concerning hours and overtime would be altered significantly by the undertakings. For example, the undertakings would reduce the averaging period from 26 weeks to four weeks, introduce new minimum engagement provisions, introduce changes to the overtime arrangements, introduce time off in lieu arrangements and revise the arrangements applying to breaks. I note the preferred hours clause would (appropriately enough) be removed by undertakings, albeit it must be said it is difficult to see what work this clause would have performed in an enterprise agreement that had a 26 weeks’ averaging period for ordinary hours and the payment of overtime (and, otherwise, had no real work parameters to give practical form and substance to the concept of ordinary working hours/overtime hours in the Agreement).
[35] Section 190(3)(b) of the Act provides that Fair Work Australia may accept a written undertaking only if Fair Work Australia is satisfied that the effect of accepting the undertaking is not likely to result in substantial changes to the agreement. While the undertakings would not cause financial detriment to the employees covered by the Agreement, they would, taken collectively, result in changes that would substantially change the Agreement that was the subject of the vote. Following from the approach in Rockleigh (Vic) Pty Ltd T/A Workforce Extensions Castlemaine [2010] FWA 6570 at [9]-[10], Lighthouse Protection Group [2010] FWA 6553 at [7]-[9] and Earthfield at [8], I do not consider the undertakings may be accepted. In any event, the undertakings do not address other shortcomings of the Agreement in relation to award-referenced entitlements such as would allow a conclusion the better off overall test has been met - and if additional undertakings were provided they would result in further change to the already substantial changes proposed to the Agreement.
[36] I have a residual concern about the level of explanation that was provided to the employees about the practical effect of an Agreement with loaded rates to compensate for a range of entitlements being adjusted over the four year life of the Agreement only through the engagement of s.206 of the Act. As I have noted, it is unclear to me why financially rational and economically self-interested employees would have voted for an Agreement if the applicant properly explained to employees that they will be progressively financially disadvantaged by this Agreement and will not receive wage increases at all unless the rates loaded to compensate for miscellaneous entitlements fall behind legislated minima concerning base rates of pay. If this application were not being dismissed on other grounds, I would have sought further information about advice provided to employees concerning adjustment by operation of s.206 and explanation about the effect on the value of the starting loaded rates as at the test time.
[37] The application is dismissed.
COMMISSIONER
Appearances:
A. Grant, solicitor and P. Ryan, solicitor, for the applicant.
Hearing details:
Sydney
2010
August 11, 25.
Final written submissions:
1 September 2010.
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